Point-Counterpoint: CFPB at House Financial Services

Recently, lawmakers from both sides of the aisle took issue with the Consumer Financial Protection Bureau's approach to regulating payday loans. Below is a point-counterpoint, using direct quotes from the hearing, to CFPB Acting Deputy Director David Silberman's testimony:

POINT: The Bureau is not subverting state laws.

Silberman: "You're certainly right that if a state had a less restrictive rule, our floor would take precedence in that sense." (2:22:38)

Silberman: "The rule that's under consideration - and, again, this is just an outline of proposals, not a proposal - would not eliminate any state law, including a law of Utah." (1:33:00)

COUNTERPOINT: The CFPB's proposed regulations are federal overreach and will preempt laws crafted and debated over decades by local and state policymakers.

Rep. Mulvaney (R-SC): "You can't call it a floor when your requirement is more restrictive than ours is. If you were to pass a regulation that requires a 60-day cooling off period, wouldn't that preempt my 2-day cooling off period?" (2:22:07)

Rep. Mia Love (R-UT): "I find it offensive that you would say that people aren't smart enough to make decisions for themselves. So you have to go into states, you have to go into cities, you have to go into all these other places to say, 'trust Washington, we know what's best for you. ... don't worry, your states aren't doing a great job. They don't understand what your needs are, we understand more than anybody else.'" (1:34:10)

Rep. Barr (R-KY): "What justifies the federal bureau canceling the collective judgment of Kentucky legislators, a governor, and a regulator in Kentucky? ... You're canceling the collective judgment of the general assembly of Kentucky." (2:06:35)

Rep. Neugebauer (R-TX): "It's really up to the Congress to determine if it's appropriate to preempt a state's law, but it's not up to a bureau to do it. To me, the fact that the executive branch has decided that they're going to preempt 50 states' rights to govern an area of finance in their states isn't up to the bureau to do that. To me, that would be up to the Congress." (2:06:35)

BOTTOM LINE: States that have worked hard to develop laws and regulations that balance consumer protection with equitable access to credit will be undermined. Local regulators and policymakers, who have over their careers ensured that consumers have legitimate options to choose from, will be undermined. And consumers will suffer the consequences.

POINT: CFPB rules will preserve borrowers' access to credit.

Silberman:"The goal of the proposals under consideration is to prevent consumers from being offered unaffordable loans while still preserving access to affordable credit." (43:59)

Rep. Guinta (R-NH): "As we know from the FDIC, 51 million people in our country are either underbanked or have no banking option at all...How would a hardworking American family manage their money if they don't belong to an institution, if they don't have access to a credit union or community-based bank or larger institution? They rely on products that short-term lenders offer." (1:53:03)

Rep. Love (R-UT): "For instance, a young, hardworking, single mom comes home from work -- and this is a true story -- comes home from work late at night to find out that her daughter has run out -- her babysitter ran out of formula three hours ago. She uses her last resort option, goes to her payday loan, goes to the store, and buys formula for her daughter. What would you suggest that she do? Knock on everybody's door? What would you suggest that she do? Because there are other actors that have used this as a last resort and it has worked for them." (1:33:36)

Rep. Tipton (R-CO): "I'd like to be able to cite our attorney general, Cynthia Coffman, in regards to the rules that you want to be able to put forward. She states in her letter to you, 'Colorado's extensive experience with these types of measures tells us that such proposals - your proposals - will not work in the real world, if the intent is to preserve access to credit.'" (1:22:53)

Rep. Neugebauer (R-TX): "Using behavioral economics, which very principles say policymakers should make choices for unsophisticated individuals, the CFPB has set down a road of paternalistic erosion of consumer product choices and access to credit." (20:24)

BOTTOM LINE: The CFPB's arbitrary rules will unnecessarily restrict consumers' access to critical short term credit. Borrowers in 35 states with effective payday loan regulations will be forced to turn to more expensive, often unregulated alternatives, or have no credit options available at all in an emergency.

POINT: The Bureau has sought input from a wide range of stakeholders.

Silberman: "We have throughout this process engaged extensively with stakeholders across the spectrum with advocates, with representatives." (2:15:56)

Rep. Rothfus (R-PA): "The cozy relationship between the bureau and the Center for Responsible Lending has been widely reported. Employees have moved between the bureau and the CRL during the rulemaking process. There has been extensive communication and coordination between staff. And at one point, the CRL provided the CFPB with an outline of their proposal to regulate small dollar lending so that the CFPB could work to improve it." (2:16:25)

Rep. Barr (R-KY): "A constituent of mine felt that their input was completely disregarded in the course of the SBREFA process and that your regulators failed to demonstrate a comprehension of the current very stringent state regulator structure." (2:07:07)

BOTTOM LINE:Certain outside groups, such as the Center for Responsible Lending, have unduly influenced the Bureau's regulatory agenda, while key constituents, like small business owners and those who use short-term credit, were dismissed by the Bureau. As reported in Politico, the CFPB has effectively outsourced its rulemaking to an outside activist group with a financial motivation.

POINT: The Bureau maintains its research is extensive, data-driven and not a means to an ideological end.

Silberman: "The first is that the bureau has been engaged in a very thoughtful, extensive, data-driven research effort with respect to this product. We have held three field hearings. We've done two research reports. We have had extensive outreach." (1:26:24)

COUNTERPOINT: CFPB's research is intentionally misleading to create a specific narrative.

Rep. Pearce (R-NM): "Now, I'm asking you, would you loan $100 for a month for 75 cents rate of return? And that's what you, the agency, are doing by putting numbers like this in reports. And you're going to an industry where I've got two letters today that come from constituents who this past week walked into places where one says, I had a medical emergency, I got a disabled daughter. I just needed help to make it to the end of the month. And you're going to shut down 70 percent of these people, you. You, Mr. Silberman, are going to shut down 70 percent of these people if you put this rule into place." (1:01:20)

Rep. Pearce (R-NM): "Why did you issue a report on something you have no interest in? You said it's not right for the agency to take a position on that. So why did you issue a report on it? It's obvious that you have an opinion about it as an agency." (1:00:20)

BOTTOM LINE:TheCFPB's research is not held to government research standards under the Information Quality Act, including peer review. According to the Bureau, the research is not intended to inform the development of policy, and does not have consequences for specific products. There are also crucial flaws in their research: the CFPB's April 2013 white paper, which forms the backbone of the Bureau's proposed rule outline, excludes 92 percent of one-time borrowers but counts every 12-time borrower.

POINT: Lower-cost alternatives exist to fill the gap in the marketplace.

Silberman: "The proposals that we indicated we are considering would allow any institution, a depository or non-depository, a credit union or a bank, to take advantage, to make payday alternative loans within the parameters of their regulation." (1:38:55)

Silberman: "The National Credit Union Administration, has adopted provisions for what they call a payday alternative loan to enable credit unions to make a product that they think works. The evidence is that a significant number of credit unions are taking advantage of that. And the outlines of the proposals under consideration, we indicated that we would allow that to continue as essentially exception to the general rule." (1:37:43)

Luetkemeyer (R-MO): "But bottom line of this, we've got the administration that's going to get in the payday lending business, and they know they can't make money at it, and they're going to subsidize it by $10 million. You know what? How about if we just go give them grants? Every time you need a set of new tires on your car, just go to the government to get a grant to get $500 to go get a new set of tires. OK. How about if your kids need new braces? Go to the government and get a grant for $2,000. That's what you're talking about here. That is wrong." (1:14:03)

BOTTOM LINE: The White House's 2017 budget proposal, which included a proposal to fund a program that would offer small-dollar loans through Community Development Financial Institutions, is offering a solution in search of a problem. When viewed with the CFPB's short-term lending regulation outline - which by the Bureau's admission will decimate the industry and which will regulate providers instead of credit products - this proposal is meant to replace private industry with yet another unproven government program.

Recently, lawmakers from both sides of the aisle took issue with the Consumer Financial Protection Bureau's approach to regulating payday loans. Below is a point-counterpoint, using direct quotes from the hearing, to CFPB Acting Deputy Director David Silberman's testimony:

POINT: The Bureau is not subverting state laws.

Silberman: "You're certainly right that if a state had a less restrictive rule, our floor would take precedence in that sense." (2:22:38)

Silberman: "The rule that's under consideration - and, again, this is just an outline of proposals, not a proposal - would not eliminate any state law, including a law of Utah." (1:33:00)

COUNTERPOINT: The CFPB's proposed regulations are federal overreach and will preempt laws crafted and debated over decades by local and state policymakers.

Rep. Mulvaney (R-SC): "You can't call it a floor when your requirement is more restrictive than ours is. If you were to pass a regulation that requires a 60-day cooling off period, wouldn't that preempt my 2-day cooling off period?" (2:22:07)

Rep. Mia Love (R-UT): "I find it offensive that you would say that people aren't smart enough to make decisions for themselves. So you have to go into states, you have to go into cities, you have to go into all these other places to say, 'trust Washington, we know what's best for you. ... don't worry, your states aren't doing a great job. They don't understand what your needs are, we understand more than anybody else.'" (1:34:10)

Rep. Barr (R-KY): "What justifies the federal bureau canceling the collective judgment of Kentucky legislators, a governor, and a regulator in Kentucky? ... You're canceling the collective judgment of the general assembly of Kentucky." (2:06:35)

Rep. Neugebauer (R-TX): "It's really up to the Congress to determine if it's appropriate to preempt a state's law, but it's not up to a bureau to do it. To me, the fact that the executive branch has decided that they're going to preempt 50 states' rights to govern an area of finance in their states isn't up to the bureau to do that. To me, that would be up to the Congress." (2:06:35)

BOTTOM LINE: States that have worked hard to develop laws and regulations that balance consumer protection with equitable access to credit will be undermined. Local regulators and policymakers, who have over their careers ensured that consumers have legitimate options to choose from, will be undermined. And consumers will suffer the consequences.

POINT: CFPB rules will preserve borrowers' access to credit.

Silberman:"The goal of the proposals under consideration is to prevent consumers from being offered unaffordable loans while still preserving access to affordable credit." (43:59)

Rep. Guinta (R-NH): "As we know from the FDIC, 51 million people in our country are either underbanked or have no banking option at all...How would a hardworking American family manage their money if they don't belong to an institution, if they don't have access to a credit union or community-based bank or larger institution? They rely on products that short-term lenders offer." (1:53:03)

Rep. Love (R-UT): "For instance, a young, hardworking, single mom comes home from work -- and this is a true story -- comes home from work late at night to find out that her daughter has run out -- her babysitter ran out of formula three hours ago. She uses her last resort option, goes to her payday loan, goes to the store, and buys formula for her daughter. What would you suggest that she do? Knock on everybody's door? What would you suggest that she do? Because there are other actors that have used this as a last resort and it has worked for them." (1:33:36)

Rep. Tipton (R-CO): "I'd like to be able to cite our attorney general, Cynthia Coffman, in regards to the rules that you want to be able to put forward. She states in her letter to you, 'Colorado's extensive experience with these types of measures tells us that such proposals - your proposals - will not work in the real world, if the intent is to preserve access to credit.'" (1:22:53)

Rep. Neugebauer (R-TX): "Using behavioral economics, which very principles say policymakers should make choices for unsophisticated individuals, the CFPB has set down a road of paternalistic erosion of consumer product choices and access to credit." (20:24)

BOTTOM LINE: The CFPB's arbitrary rules will unnecessarily restrict consumers' access to critical short term credit. Borrowers in 35 states with effective payday loan regulations will be forced to turn to more expensive, often unregulated alternatives, or have no credit options available at all in an emergency.

POINT: The Bureau has sought input from a wide range of stakeholders.

Silberman: "We have throughout this process engaged extensively with stakeholders across the spectrum with advocates, with representatives." (2:15:56)

Rep. Rothfus (R-PA): "The cozy relationship between the bureau and the Center for Responsible Lending has been widely reported. Employees have moved between the bureau and the CRL during the rulemaking process. There has been extensive communication and coordination between staff. And at one point, the CRL provided the CFPB with an outline of their proposal to regulate small dollar lending so that the CFPB could work to improve it." (2:16:25)

Rep. Barr (R-KY): "A constituent of mine felt that their input was completely disregarded in the course of the SBREFA process and that your regulators failed to demonstrate a comprehension of the current very stringent state regulator structure." (2:07:07)

BOTTOM LINE:Certain outside groups, such as the Center for Responsible Lending, have unduly influenced the Bureau's regulatory agenda, while key constituents, like small business owners and those who use short-term credit, were dismissed by the Bureau. As reported in Politico, the CFPB has effectively outsourced its rulemaking to an outside activist group with a financial motivation.

POINT: The Bureau maintains its research is extensive, data-driven and not a means to an ideological end.

Silberman: "The first is that the bureau has been engaged in a very thoughtful, extensive, data-driven research effort with respect to this product. We have held three field hearings. We've done two research reports. We have had extensive outreach." (1:26:24)

COUNTERPOINT: CFPB's research is intentionally misleading to create a specific narrative.

Rep. Pearce (R-NM): "Now, I'm asking you, would you loan $100 for a month for 75 cents rate of return? And that's what you, the agency, are doing by putting numbers like this in reports. And you're going to an industry where I've got two letters today that come from constituents who this past week walked into places where one says, I had a medical emergency, I got a disabled daughter. I just needed help to make it to the end of the month. And you're going to shut down 70 percent of these people, you. You, Mr. Silberman, are going to shut down 70 percent of these people if you put this rule into place." (1:01:20)

Rep. Pearce (R-NM): "Why did you issue a report on something you have no interest in? You said it's not right for the agency to take a position on that. So why did you issue a report on it? It's obvious that you have an opinion about it as an agency." (1:00:20)

BOTTOM LINE:TheCFPB's research is not held to government research standards under the Information Quality Act, including peer review. According to the Bureau, the research is not intended to inform the development of policy, and does not have consequences for specific products. There are also crucial flaws in their research: the CFPB's April 2013 white paper, which forms the backbone of the Bureau's proposed rule outline, excludes 92 percent of one-time borrowers but counts every 12-time borrower.

POINT: Lower-cost alternatives exist to fill the gap in the marketplace.

Silberman: "The proposals that we indicated we are considering would allow any institution, a depository or non-depository, a credit union or a bank, to take advantage, to make payday alternative loans within the parameters of their regulation." (1:38:55)

Silberman: "The National Credit Union Administration, has adopted provisions for what they call a payday alternative loan to enable credit unions to make a product that they think works. The evidence is that a significant number of credit unions are taking advantage of that. And the outlines of the proposals under consideration, we indicated that we would allow that to continue as essentially exception to the general rule." (1:37:43)

Luetkemeyer (R-MO): "But bottom line of this, we've got the administration that's going to get in the payday lending business, and they know they can't make money at it, and they're going to subsidize it by $10 million. You know what? How about if we just go give them grants? Every time you need a set of new tires on your car, just go to the government to get a grant to get $500 to go get a new set of tires. OK. How about if your kids need new braces? Go to the government and get a grant for $2,000. That's what you're talking about here. That is wrong." (1:14:03)

BOTTOM LINE: The White House's 2017 budget proposal, which included a proposal to fund a program that would offer small-dollar loans through Community Development Financial Institutions, is offering a solution in search of a problem. When viewed with the CFPB's short-term lending regulation outline - which by the Bureau's admission will decimate the industry and which will regulate providers instead of credit products - this proposal is meant to replace private industry with yet another unproven government program.

Recently, lawmakers from both sides of the aisle took issue with the Consumer Financial Protection Bureau's approach to regulating payday loans. Below is a point-counterpoint, using direct quotes from the hearing, to CFPB Acting Deputy Director David Silberman's testimony:

POINT: The Bureau is not subverting state laws.

Silberman: "You're certainly right that if a state had a less restrictive rule, our floor would take precedence in that sense." (2:22:38)

Silberman: "The rule that's under consideration - and, again, this is just an outline of proposals, not a proposal - would not eliminate any state law, including a law of Utah." (1:33:00)

COUNTERPOINT: The CFPB's proposed regulations are federal overreach and will preempt laws crafted and debated over decades by local and state policymakers.

Rep. Mulvaney (R-SC): "You can't call it a floor when your requirement is more restrictive than ours is. If you were to pass a regulation that requires a 60-day cooling off period, wouldn't that preempt my 2-day cooling off period?" (2:22:07)

Rep. Mia Love (R-UT): "I find it offensive that you would say that people aren't smart enough to make decisions for themselves. So you have to go into states, you have to go into cities, you have to go into all these other places to say, 'trust Washington, we know what's best for you. ... don't worry, your states aren't doing a great job. They don't understand what your needs are, we understand more than anybody else.'" (1:34:10)

Rep. Barr (R-KY): "What justifies the federal bureau canceling the collective judgment of Kentucky legislators, a governor, and a regulator in Kentucky? ... You're canceling the collective judgment of the general assembly of Kentucky." (2:06:35)

Rep. Neugebauer (R-TX): "It's really up to the Congress to determine if it's appropriate to preempt a state's law, but it's not up to a bureau to do it. To me, the fact that the executive branch has decided that they're going to preempt 50 states' rights to govern an area of finance in their states isn't up to the bureau to do that. To me, that would be up to the Congress." (2:06:35)

BOTTOM LINE: States that have worked hard to develop laws and regulations that balance consumer protection with equitable access to credit will be undermined. Local regulators and policymakers, who have over their careers ensured that consumers have legitimate options to choose from, will be undermined. And consumers will suffer the consequences.

POINT: CFPB rules will preserve borrowers' access to credit.

Silberman:"The goal of the proposals under consideration is to prevent consumers from being offered unaffordable loans while still preserving access to affordable credit." (43:59)

Rep. Guinta (R-NH): "As we know from the FDIC, 51 million people in our country are either underbanked or have no banking option at all...How would a hardworking American family manage their money if they don't belong to an institution, if they don't have access to a credit union or community-based bank or larger institution? They rely on products that short-term lenders offer." (1:53:03)

Rep. Love (R-UT): "For instance, a young, hardworking, single mom comes home from work -- and this is a true story -- comes home from work late at night to find out that her daughter has run out -- her babysitter ran out of formula three hours ago. She uses her last resort option, goes to her payday loan, goes to the store, and buys formula for her daughter. What would you suggest that she do? Knock on everybody's door? What would you suggest that she do? Because there are other actors that have used this as a last resort and it has worked for them." (1:33:36)

Rep. Tipton (R-CO): "I'd like to be able to cite our attorney general, Cynthia Coffman, in regards to the rules that you want to be able to put forward. She states in her letter to you, 'Colorado's extensive experience with these types of measures tells us that such proposals - your proposals - will not work in the real world, if the intent is to preserve access to credit.'" (1:22:53)

Rep. Neugebauer (R-TX): "Using behavioral economics, which very principles say policymakers should make choices for unsophisticated individuals, the CFPB has set down a road of paternalistic erosion of consumer product choices and access to credit." (20:24)

BOTTOM LINE: The CFPB's arbitrary rules will unnecessarily restrict consumers' access to critical short term credit. Borrowers in 35 states with effective payday loan regulations will be forced to turn to more expensive, often unregulated alternatives, or have no credit options available at all in an emergency.

POINT: The Bureau has sought input from a wide range of stakeholders.

Silberman: "We have throughout this process engaged extensively with stakeholders across the spectrum with advocates, with representatives." (2:15:56)

Rep. Rothfus (R-PA): "The cozy relationship between the bureau and the Center for Responsible Lending has been widely reported. Employees have moved between the bureau and the CRL during the rulemaking process. There has been extensive communication and coordination between staff. And at one point, the CRL provided the CFPB with an outline of their proposal to regulate small dollar lending so that the CFPB could work to improve it." (2:16:25)

Rep. Barr (R-KY): "A constituent of mine felt that their input was completely disregarded in the course of the SBREFA process and that your regulators failed to demonstrate a comprehension of the current very stringent state regulator structure." (2:07:07)

BOTTOM LINE:Certain outside groups, such as the Center for Responsible Lending, have unduly influenced the Bureau's regulatory agenda, while key constituents, like small business owners and those who use short-term credit, were dismissed by the Bureau. As reported in Politico, the CFPB has effectively outsourced its rulemaking to an outside activist group with a financial motivation.

POINT: The Bureau maintains its research is extensive, data-driven and not a means to an ideological end.

Silberman: "The first is that the bureau has been engaged in a very thoughtful, extensive, data-driven research effort with respect to this product. We have held three field hearings. We've done two research reports. We have had extensive outreach." (1:26:24)

COUNTERPOINT: CFPB's research is intentionally misleading to create a specific narrative.

Rep. Pearce (R-NM): "Now, I'm asking you, would you loan $100 for a month for 75 cents rate of return? And that's what you, the agency, are doing by putting numbers like this in reports. And you're going to an industry where I've got two letters today that come from constituents who this past week walked into places where one says, I had a medical emergency, I got a disabled daughter. I just needed help to make it to the end of the month. And you're going to shut down 70 percent of these people, you. You, Mr. Silberman, are going to shut down 70 percent of these people if you put this rule into place." (1:01:20)

Rep. Pearce (R-NM): "Why did you issue a report on something you have no interest in? You said it's not right for the agency to take a position on that. So why did you issue a report on it? It's obvious that you have an opinion about it as an agency." (1:00:20)

BOTTOM LINE:TheCFPB's research is not held to government research standards under the Information Quality Act, including peer review. According to the Bureau, the research is not intended to inform the development of policy, and does not have consequences for specific products. There are also crucial flaws in their research: the CFPB's April 2013 white paper, which forms the backbone of the Bureau's proposed rule outline, excludes 92 percent of one-time borrowers but counts every 12-time borrower.

POINT: Lower-cost alternatives exist to fill the gap in the marketplace.

Silberman: "The proposals that we indicated we are considering would allow any institution, a depository or non-depository, a credit union or a bank, to take advantage, to make payday alternative loans within the parameters of their regulation." (1:38:55)

Silberman: "The National Credit Union Administration, has adopted provisions for what they call a payday alternative loan to enable credit unions to make a product that they think works. The evidence is that a significant number of credit unions are taking advantage of that. And the outlines of the proposals under consideration, we indicated that we would allow that to continue as essentially exception to the general rule." (1:37:43)

Luetkemeyer (R-MO): "But bottom line of this, we've got the administration that's going to get in the payday lending business, and they know they can't make money at it, and they're going to subsidize it by $10 million. You know what? How about if we just go give them grants? Every time you need a set of new tires on your car, just go to the government to get a grant to get $500 to go get a new set of tires. OK. How about if your kids need new braces? Go to the government and get a grant for $2,000. That's what you're talking about here. That is wrong." (1:14:03)

BOTTOM LINE: The White House's 2017 budget proposal, which included a proposal to fund a program that would offer small-dollar loans through Community Development Financial Institutions, is offering a solution in search of a problem. When viewed with the CFPB's short-term lending regulation outline - which by the Bureau's admission will decimate the industry and which will regulate providers instead of credit products - this proposal is meant to replace private industry with yet another unproven government program.

A single payday advance is typically for two to four weeks. However, borrowers often use these loans over a period of months, which can be expensive. Payday advances are not recommended for long-term financial solutions.